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Sources of Finance

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Introduction

Sources of Finance Obviously to start my business I will need a large amount of capital which will could be gained through a number of methods which I will describe below pointing out the advantages and disadvantages of each one and then deciding whether it would be a good choice for the business. > Overdraft - This is a sum of money borrowed from the bank, usually for the purchase of small things such as stock, the advantages is its easy to obtain and quick however the main disadvantage is that you are charged daily interest on the money borrowed. This could be useful to the business once it is operating and making a profit however it would not be wise to get into debt with daily interest so early in the business's life > Share Issue / Investor - This is the sale of part of the business for an amount of capital, the advantage is that it is quick and sometimes the investor can also help and/or offer advice, however an obvious disadvantage is that you are loosing complete ownership of the company. ...read more.

Middle

Trade credit is definitely something that my business could use as a source of finance at the start as it could then use the capital it has for other purposes > Hire purchase - Hire purchase is obtaining an item through monthly payments, however the business does not own the item until it has been totally paid for, the advantages of this system is that the business does not have to pay immediately. The disadvantage however is that interest has to be paid on the payments back and therefore the business will end up paying more than if they had just bought the item in the first place. Hire purchase is something that my business could consider however the sort of stock and items that is needed in a sports shop are not really the sort of items that would be bought on hire purchase. > Grants - Grants is capital gained for free, usually given by the local or European government, the advantage is of course the free capital which will help the business, also it does not have to be repaid. ...read more.

Conclusion

My business will not need a mortgage as I have chosen property two which was a lease property meaning that the only money which needs to be paid is the �20,000 per annum fee. > Lease - A lease is where an item is rented for a monthly or annual fee, the advantage is that lease products usually come with a 24 helpline and maintenance service, and also when the product becomes outdated you can just lease a better model etc. However the disadvantage is that the business does not actually own the product, and never will. Personally I feel that leasing an item is a good idea and if the situation where a suitable item is needed for my business I will try and lease it. In the above points I have stated which sources of finance are most suited to my business and why, I will use these to gain the capital, stock and premises needed to start my business. ...read more.

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